United Arab Emirates: VAT Guide For Insurance In UAE: What You Should Know

Last Updated: 19 October 2018
Article by Adrian Low and Wayne Jones

After a period of much debate as to the application of VAT in the re/insurance industry in the UAE, the UAE Federal Tax Authority (FTA) has provided some clarification in the form of a VAT guide for the UAE insurance sector (the Guide) issued on 2 October 2018. The FTA recognises that transactions in the insurance sector have been complex to analyse. We have highlighted below a few of the more pertinent issues addressed in the Guide.

Bundled products

Insurance products may be packaged or 'bundled' together where they would ordinarily be treated as separate services. The issue that arises is how to characterise such a supply, where services are treated to different degrees of taxation; one supply may be taxed with the standard VAT rate and another with a zero rate or exemption, such as the provision of add-on insurance products ('riders') to a life insurance policy.

The FTA has clarified that there will be a single composite supply where one or more elements of the supply comprise the principal component, with other elements being ancillary – i.e. not an aim in itself, but a means of better enjoying the principal component. A single composite supply exists where there is a supply which has two or more elements which are so closely linked that they form a single supply and which it would be artificial or impossible to split. A single composite supply will only typically exist where:

  • the price of the different components of the supply is not separately identified or charged by the supplier; and
  • all the components of the supply are supplied by a single supplier.

This means that if, for example, a policyholder takes a life insurance policy and tops this up with a health rider under one contract, and the prices are not separately identified, the premium would be exempt because the principal component is the life insurance, not the health insurance.

Transitional issues

There was considerable debate at the start of the year as to the appropriate VAT treatment for insurance policies that had been entered into and paid for before 1 January 2018 but provided coverage after this date. This was most frequently faced in relation to policies held by individual retail customers where insurance policies did not contain a specific VAT clause and resulted in insurers not being able to recover any VAT. The FTA has clarified that part of the premium which is due post 1 January 2018 is liable to VAT and insurers should have applied a fair and reasonable pro-rata to premiums received before 1 January 2018 which apply to services which are provided/have been provided after that date.

Apportionment of overheads

VAT incurred on costs which are partly attributable to taxable supplies (e.g. non-life insurance) and also to exempt supplies of financial services (e.g. life insurance) must be apportioned and the supplier must make use of an input tax apportionment method in order to determine the amount of input tax which it may recover in such circumstances. Where input tax cannot be wholly attributed to any particular supply, the FTA has indicated that a business may choose between either using the standard input tax apportionment method or by way of a special input tax apportionment method specifically approved by the FTA if the standard approach will not render a fair and reasonable result.

The standard input tax apportionment method requires applying the recovery ratio percentage to the residual input tax. An 'annual adjustment' should be carried out in the first tax period following the end of the previous tax year. If this annual adjustment reveals a difference of more than AED 250,000 in any tax year between the recoverable input tax and the input tax which would have been recoverable if the calculation was made on the basis of the actual use of the goods or services, then an adjustment should be made to the input tax in the first tax period following the end of the relevant tax year. Where the difference is less that AED 250,000, no adjustment is required to be made.

Insurance intermediaries (agents/brokers)

Where an insurance intermediary (i.e. an agent or broker) acts as a disclosed agent for an insurance transaction, the collection of the premium from the insured on the insurer's behalf and remission of the premium to the insurer (possibly net of commission) are not supplies for VAT purposes. The commission or fee charged by the intermediary to the insurer or insured for the services provided is a supply and is either liable to VAT at the standard or zero rate, or is out of scope, depending on the application of the place of supply rules. It is clear that the FTA envisages that the intermediary is providing a service to either the insured or the insurer. It will therefore be important for intermediaries and their principals to make clear what service is being provided by the intermediary, and to whom. We would anticipate that an intermediary's terms of business with its principal/s should make this clear, in order to provide clarity to the VAT treatment of the services provided.


The FTA has confirmed that reinsurance placed with a reinsurer located outside UAE should be treated as an imported service and the reinsurance premium payable by the insurance company will be subject to VAT under the reverse charge mechanism (except for life reinsurance which is exempt).

Recovery of input VAT on health insurance premiums

The FTA makes a distinction between health insurance provided for an employee and family members of that employee:

  • Employees: An employer will be able to recover input tax on premiums on health insurance coverage provided by the employer to employees as a benefit which is part of a contract of employment;
  • Family members of employees: Where health insurance is also provided to the family members of the employee, input tax can only be recovered if there is a legal obligation to provide the insurance to these family members.

This requirement for a legal obligation would only be fulfilled where the labour law stipulates that the employee's family members must be provided with health insurance. There is currently no legal obligation in Dubai on the employer to provide health insurance to the family members of an employee, whereas the Abu Dhabi Health Insurance Law mandates employers to provide such extended benefits to the employee's spouse and three of the employee's children below 18 years of age. A mere contractual term of employment to provide health insurance to an employee's family will not enable VAT to be recovered.

Insurance on Real Estate

Where a supply of services is considered to be related to real estate, the place of supply of the services is where the real estate is located. The FTA has clarified that a supply of insurance in respect of real estate will not be considered as a supply of services related to real estate and such supply shall be determined based on general place of supply rules, unless the insurance is included within the service charge for real estate.

Export of life insurance

The supply of life insurance to a recipient established outside the GCC Implementing States (whether or not such supply would otherwise have been exempt where supplied in the UAE) will be zero-rated (i.e. treated as taxable supplies).

Islamic insurance

The FTA has clarified that there must be equality of VAT treatment between Islamic and non-Islamic finance products. Therefore, any supply made under an Islamic financial arrangement, which is certified as Shariah compliant, and which has the intention of and achieves effectively the same result as a non-Islamic financial product, must be treated in such a way as to give an outcome for the purposes of VAT comparable to that which would be the case for its non-Islamic counterpart. However, where non-equivalent products are supplied, the features and circumstances of the product concerned must be taken into account when determining the appropriate VAT treatment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions